Have you ever rented the unit in someone’s basement? Maybe your spouse’s mother moved into your “Mother-In-Law Unit” above your garage? Or have you ever travelled and stayed in a pool house for your stay? Commonly referred to as “Mother-In-Law” units, homeowners use these as a way to fill the space in their home and gain residual income, either from vacationers or long-term tenants.
The official terms for these units are Additional Dwelling Units (ADU) or Detached Additional Dwelling Units (DADU’s), and are defined as extra spaces in homes and on properties where someone can live completely independent of the main house.
These units can be almost anywhere on the property, but they are usually located in the basement, in the backyard, or above the garage. They have their own bathroom and kitchen facilities, and sometimes they share laundry with the main house.
Thinking of adding a unit to your home? Here are some benefits and risks, as well as important aspects to consider before you build:
Homeowners can maximize their investment by renting out the extra space to long-term tenants for short-term vacationers. These tenants can help pay off debt or create an extra stream of income to pay for other needs or wants.
Depending on several factors, including the size of the unit, the market in the area, and other factors, each homeowner should decide which option they are more comfortable with. These decisions should be made before they list the unit for rent to best market to the right audience.
An obvious risk is that when you open your space to a stranger, there’s a possibility that things might end poorly. Either the tenants could turn out to be untrustworthy, or unreliable, leading to a financial burden.
To minimize the risks, it’s a good idea to use an application process to check backgrounds and employment history as a tool to get to know the potential tenant. Make sure to adhere to the National Fair Housing Laws and your local regulations.
Things to Consider:
- What are the shared spaces?
- Would you be comfortable sharing those spaces, and potentially appliances, with a new person each weekend, or would you rather get to know the long-term tenant who would use those on a consistent basis?
- Rooms like the kitchen can be great for those who want to get more interaction from their vacation renters. However, sharing one bathroom between the homeowners and the visitors can be uncomfortable and risky.
- Would you be okay with a long-term renter using your laundry facilities? What kind of access would they need to the house in order to use those machines?
- What is the size of the ADU/DADU?
- Is it truly a space where someone could live, or would it be too tight to fit all the necessary appliances?
- Does the unit adhere to your local housing codes as a livable space?
- How close are the units and what noise level are you comfortable with?
- As a long-term landlord, tenants have the right to quiet enjoyment without the landlord barging into their space or controlling their activities. If the unit is in the basement and the tenant has friends or family over, that noise could permeate into your unit in the late hours of the night. A way to prevent this is to be sure to layout quiet hours and expectations before they sign the lease or make an agreement so that you and the tenant are on the same page.
- The same goes for the rules in the vacation rental listing. Managing expectations is the first way to create a relationship with the tenants, even those there for the weekend.
- What improvements are required to make the unit livable?
- Do you need to add a kitchen or a bathroom? What are the costs associated with those improvements and would the market-rate rental prices make up for those improvements? You might not get your money back within the year, but if you’re dedicated to making the space worth it to rent it out over the next few years, these improvements, and financial obligations are necessary.
- If these initial investments aren’t viable for your situation, it might be a good idea to look at other options to earn rent from your home, including adding roommates with whom you’re willing to share all the common spaces.
Whatever you decide, it’s important to be familiar with the rental market and regulations in both your local region and your neighborhood.
Do you have an ADU or DADU on your property? How do you use it? Let us know in the comments.
Summer is here, which means vacations are on the mind, but as always the cost can feel prohibitive. As folks take less and less time off work, people shortening their vacations, staying closer to home, or going nowhere at all for “staycations”. Another way to save money, while still getting away, is to leverage your own home for a home exchange.
A home exchange—often called “house-swapping”—is a money-smart vacation idea that’s been around for a long time. The concept is more popular than ever, with home-sharing plans like AirBnB becoming ubiquitous, but a unique one-to-one swap can be an even more affordable option.
Why a home exchange? Since accommodations are usually the priciest part of a vacation, a home exchange saves money, allowing travelers to take longer vacations and perhaps splurge a bit on dining, tours, or shopping. Larger families appreciate how homes meet their needs for space, meals, and a good night’s sleep. And, home-swappers often say they enjoy “living like the locals,” especially when traveling internationally.
How it works. The basic idea of a home exchange is that two families agree to live in each other’s home (usually at the same time) at no cost—it’s considered an even trade. Exchangers find one another via home exchange website that provides detailed listings of available homes. Exchanges take place within the United States or internationally, and the length of stay is whatever the parties agree upon. Exchangers typically do not meet in person but get acquainted via phone calls and emails before the exchange happens. Details, including pets, the use of a car, and cleaning are all agreed upon ahead of time, usually in a written contract provided by the website.
What makes a house desirable? You might be surprised! As a general rule, home exchangers are looking for location, location, location. They want to explore attractions in your area, attend an event, or visit family. A beachfront house in California is highly desirable, as is a condo in an exciting city—and even a home in the suburbs will appeal to the right travelers. Because swappers are primarily looking for a convenient jumping-off point for their adventures, your home’s age, floor plan, and furnishings don’t matter too much, as long as it’s clean, comfortable, and accommodating.
Vacation homes are ideal. Whether it’s a rustic cottage on a secluded fishing lake or a condo at a popular ski area, a second home is ideal for exchanges. Logistically, you don’t have to vacate your primary residence, and you have more flexibility as to when the swap can happen. For this reason, many retirees—who often own second homes and enjoy freer schedules—find home exchanges especially appealing.
First steps. If you’re intrigued, start by exploring a few websites; you can view a lot of information for free. Home exchange websites typically charge an annual membership fee of $50 to $100 to list your home. If you decide to join a service, you’ll provide several photos and a detailed description of your home. You’ll also post your desired destination(s) and travel dates, and you’ll be able to peruse the homes that meet your criteria. It’s common to trade information with several homeowners before finding just the right match, and the process may take several months.
Focus on the basics. Once you’ve agreed to an exchange and are preparing your home for guests, think about what makes a hotel room enjoyable. A clean, clutter-free home is universally appealing, and comfortable mattresses and attractive bedding are a must. Your kitchen should be well organized, and internet access is a big plus. Your guests know they’re staying in someone’s home, so don’t worry about scuffed baseboards and well-worn furniture. Likewise, don’t expect five-star accommodations when you step into your host’s home.
Is a home exchange right for you? If the very thought of others living in your home and sleeping in your bed—or you in theirs—makes your palms go clammy, an exchange is probably not for you. But many travelers are hooked!